Stock-Heavy Funds Sell Big at Banks

Bank brokerage customers are as hungry for stock portfolios as their nonbank customer counterparts.

"This bull market is just driving people into equities," said David W. Dunning, senior managing director and national retail sales manager for National City Corp., Cleveland.

Like executives at Wells Fargo & Co. and Star Banc Corp., Mr. Dunning said that large-cap funds currently rank among his brokerage's top sellers. Hybrid funds that combine stock and bond investments and international portfolios are also moving fast, the executives said.

These reports are in step with the Investment Company Institute's latest snapshot of inflows to the nation's mutual funds. In March, bond and money market funds recorded minimal overall growth, while stock funds grew an impressive 5.7%, the ICI said last week.

Michael Hogan, senior vice president of Wells Fargo's mutual fund group, said equity funds are attracting investors of all stripes.

He said he expects final figures for April to show that it was an even bigger month for his brokerage, with Individual Retirement Account money flowing into mutual funds.

At National City, Mr. Dunning said that in addition to increased customer interest in large cap growth funds, tax-managed equity funds are doing better and will continue to grow. Tax-managed funds become more attractive as individual portfolios grow and customers worry more about tax exposure, he explained.

Meanwhile, investors concerned about a possible market slow-down are looking for the diversification that international funds offer, Mr. Dunning said.

Interest in these funds picked up steam last fall and has been building over the first quarter, he said.

International fund purchases have mostly come from baby boomers with household incomes of more than $60,000-the economic segment the bank targets heavily, Mr. Dunning said.

Wells Fargo's experience is similar. Mr. Hogan said wealthier, more sophisticated investors have continued to put money into the sector, despite sour news reports from some regions.

At Star BancCorp. in Cincinnati, executives said they have been surprised by the continued level of investing in international funds. A proprietary global fund has attracted $50 million of assets since its inception last fall, said Randolph Bateman, senior vice president and chief investment officer at Star Banc.

The fund was introduced at the height of market instability in Southeast Asia, but the bank emphasized to customers that it would avoid investments there and in Japan, Mr. Bateman said.

According to the ICI, while stock funds made significant gains in March, hybrid funds also did well, growing 3.7% from February.

That popularity has also been seen at Wells Fargo, Mr. Hogan said. Investors have been attracted to some proprietary Wells Fargo offerings because these funds shift between equities and bonds. That lessens volatility because the fund can take defensive positions at times, Mr. Hogan said.

Pure bond funds, however, continue to be poor cousins to stock funds in today's environment. Mr. Dunning said there's been little interest in them since the late 1980s, when rates were high.

"We wouldn't agree with the demise of the bond fund," Mr. Hogan said.

If the market tanked, Mr. Bateman said Star Banc would have its bond funds waiting and ready. But for now, no one's suggesting a quick resurrection there.

Mr. Bateman predicts few changes in customers' appetites in the near future.